In an effort to minimize costs and maximize profits, buyers and sellers often ask why both a real estate appraisal and home inspection are needed.
Generally speaking, the appraisal is more concerned with the value of the property, and the home inspection is more concerned with the condition of the property, according to Joe Wszolek, Chief Operating Officer of the Greater Northwest Indiana Association of Realtors.
“When an appraiser looks at a property, it’s with an independent eye for anything that adds or subtracts from value including items that do not appear normal, while it’s a home inspector’s job to provide an independent view of the physical condition and functionality of a home,” the Indiana Certified Residential Appraiser explained. “The main reason an appraiser will typically spend considerably less time at the property is because its components are assumed to be fully operational unless something looks or sounds wrong. Most of an appraiser’s work is done offsite, collecting property data and conducting research on comparable sales and market trends.”
Another noteworthy difference between an appraisal and home inspection is the fact that the lender is often the client.
“When a lender is involved in the purchase of a property, the appraiser’s fiduciary relationship is with the lender,” Wszolek added. “The report is delivered directly to the lender, who will then forward a copy to the appropriate parties as required by law. The appraiser is unable to talk with anyone other than the lender about the report, unless given specific permission to do so.”
So, unlike an appraisal, where the buyer typically pays for an appraisal but is not the appraiser’s client, the client of a home inspector is typically the buyer, who is the direct recipient of the report.
“For most lender-based transactions – certainly with all 20 percent down or less mortgages - you can expect an appraisal will be required,” Wszolek said. “However, while not all lenders require a home inspection, it is becoming the norm to include an inspection in the vast majority of home transactions. When you are spending that kind of money on a major purchase, you want to make sure you know what you are buying.”
While home inspections are considered a must for buyers, many sellers also take the initiative to have one done ahead of listing their property. That way, they know about important minor maintenance issues and/or major defects, can choose to address them or not, and have a better understanding as they come into play at various stages of a real estate transaction – from pricing the home to negotiating the deal and closing the sale.
“While an appraiser will notice the fact that there are dark spots on the foundation walls indicating there may be a hidden problem, it’s the inspector’s job to determine what’s causing it,” Wszolek explained. “Usually those darks spots are indicating mold may be present, which is an indicator of so many things - from poor ventilation to a leaky pipe, runoff or seepage. Some issues have simple cures, while others are much more serious. Either way, it’s important to know what you are dealing with in a real estate transaction.”
Like real estate brokers and appraisers, home inspectors are now licensed and regulated by the state. They must enforce the standards set by the American Home Inspector Society (ASHI) and are required to stay current through continuing education.
While routine maintenance is the best way to prevent major, costly problems from developing in the first place, it’s no secret that some tasks can be ignored over time – especially when everything seems to be working just fine in a home. The result, according to the experts at ASHI, is that nearly half of all resale homes in the market today have at least one significant defect.
Since the condition of a home’s basic structure and major mechanical systems is a buyer’s top concern after location, size and style, here’s a general list of components that are routinely inspected by ASHI members:
• Structural - walls, floors, columns, ceilings, roof, attic, basement, crawlspace
• Exterior - walls, doors, windows, garage door operators, decks, balconies, stoops, steps, railings, vegetation, grading, driveways, walkways, eaves, soffits, fascia
• Interiors - ceilings, walls, floors, steps, railings, countertops, cabinets, doors, windows
• Roof - coverings, flashing, skylights, chimneys, penetrations, drainage system, gutters, downspouts
• Plumbing - interior drain, waste, venting systems, interior water supply, distribution system, fixtures, hot water system, shut off valve, sump pump
• Electrical - main entrance, distribution panels, branch circuit conductors, connected devices/fixtures, GFCI/AFCI receptacles, smoke detectors, location of panel box
• Heating and Air Conditioning – equipment, operating controls, safety controls, vents, chimney, flue, fireplace, presence of treated air in each room, condensation lines
• Insulation and Ventilation – insulation, vapor retarders in unfinished areas, venting systems, fans
• Built-in Kitchen Appliances - dishwasher, oven, range, disposal, microwave
More information on the importance of home inspection can be found at ashi.org, and you can also contact a local home inspector from the list of 24 GNIAR Associate Members who provide the service at gniar.com/related-services/134-home-inspectors.html.